(Bloomberg) — Vladimir Putin’s war on Ukraine is escalating after months of bloody attrition.
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As the conflict entered its 1,000th day, Ukraine took advantage of its newly granted long-range missile capabilities to strike a military base on Russian territory. Moscow, which has warned against such action, stepped up its threat of a nuclear response to conventional attacks.
The twin developments early on Tuesday rattled investors who have long tuned out of the war’s daily grind, prompting a rush into haven assets. In reality, the recent arrival of North Korean troops to support Russian forces on the battlefield had already upped the ante.
The prospect of Donald Trump’s return to the White House in January and his pledge to end the war in short order has created a new sense of urgency for Ukraine and its allies.
The Washington Post reported on Tuesday, citing unnamed US officials, that President Joe Biden had approved the shipment of anti-personnel landmines to Ukraine. Earlier this week, Biden dropped his longstanding opposition to long-range strikes on Russia with the American-made Army Tactical Missile Systems, known as ATACMS.
President Volodymyr Zelenskiy has been pleading for more weapons to strengthen his hand, the Biden administration is sending Kyiv as much aid as possible before it leaves office, and Germany’s Olaf Scholz called Putin last week to sound him out on talks. The Russian leader showed no interest in compromise, Scholz reported.
“The current situation offers Putin a significant temptation to escalate,” Tatyana Stanovaya, a senior fellow at the Carnegie Russia Eurasia Center, said in a post on X. Such a move would allow both Putin and Trump to blame Biden for the spiraling conflict and serve as a premise for direct talks, she said.
“This marks an extraordinarily dangerous juncture,” she added, since Putin may be trying to convince Western leaders they have to choose between a nuclear conflict or a settlement on Russia’s terms.
The news sent investors into some of the world’s safest assets. The yield on 10-year Treasuries fell as much as seven basis points, while the rate on equivalent German securities dropped 11 basis points. The moves also spread to the currency market, lifting the Japanese yen and Swiss franc.
Still, Russian Foreign Minister Sergei Lavrov sought to calm worries about a nuclear escalation, even as he accused the West of escalating the conflict. “We are strongly in favor of doing everything not to allow nuclear war to happen,” he said at the G-20. “A nuclear weapon is first and foremost a weapon to prevent any nuclear war.”
But Serbian President Aleksandar Vucic, who spoke with Putin last month, warned that if Moscow is threatened “he won’t hesitate for a second — he will use nuclear weapons.” The Russian leader wouldn’t seek nuclear confrontation now, though, as his forces are doing well on the battlefield, Vucic said in Belgrade on Tuesday.
The US signaled it wouldn’t adjust its nuclear posture in response to Russia’s decision to change its doctrine. A National Security Council spokesperson, speaking on the condition of anonymity, said the move wasn’t a surprise.
The attack came as Biden and Scholz were gathered with other Group of 20 leaders at a summit in Rio de Janeiro where maneuvering over Russia’s war has been one of the major points of contention.
The host, President Luiz Inacio Lula da Silva of Brazil, has tried to shut down debates over the conflicts in Ukraine and Gaza in order to focus on climate change and poverty. But his heavy-handed and, at times, chaotic management of the meeting has left many other leaders ill-tempered.
Adding to the sense of unease, two undersea data cables were damaged in the Baltic near the Russian exclave of Kaliningrad Monday. Governments in the region have repeatedly reported cyber attacks, disinformation and incursions by Russian jets and have warned that they will be under threat if Putin secures victory in Ukraine. The Swedish police said it started a probe into the cable breaches as possible sabotage.
“Something is going on there,” German Defense Minister Boris Pistorius said.
The origins of this week’s developments can be traced back to Pyongyang’s intervention in war last month, a move that came in defiance of warnings from Washington.
That was the shift that persuaded Biden allow ATACMS strikes on Russia. Deploying North Korean troops in combat took the situation to “another level,” Oleksandr Polishchuk, Ukraine’s ambassador to India, said in an interview in New Delhi Monday.
Ukraine’s first strike with those missiles hit an ammunition depot in the western Russian border region of Bryansk, according to local Ukrainian reports later confirmed by Russia’s Defense Ministry. The Russians reported that they downed five out of the six missiles launched and there were no casualties. Neither Ukraine’s General Staff nor Defense Ministry would comment on what systems were used.
Later in the day, Putin signed a decree expanding Russia’s nuclear doctrine under which Moscow could consider using atomic weapons, his spokesman Dmitry Peskov said. Under the revised guidelines, the Kremlin could use nuclear weapons in response to an attack on its soil by Kyiv using conventional Western weapons. Russia will also view an attack by a non-nuclear state that is supported by a nuclear power as a joint assault.
“This is Putin’s typical MO – escalating before talks,” Timothy Ash, a senior EM sovereign strategist at RBC BlueBay Asset Management, said in a blog post. “Putin is assuming he will have to sit down and talk peace with Trump at some time over the next few months.”
Zelenskiy, addressing the European Parliament in Brussels, urged governments not to “fear doing even more” to aid Kyiv’s defense against Russia.
–With assistance from Andrea Dudik, Marton Kasnyik, Alice Gledhill, Piotr Skolimowski, Thomas Hall and Misha Savic.
(Updates with Washington Post report on landmines in fifth paragraph.)
